Banks, iron ore miners to drive ASX 200 higher

The Australian sharemarket is tipped to start the week in positive territory, even as energy majors and gold miners threaten to temper any gains.

Banks and iron ore miners are tipped to drive Monday’s gains. Picture: AAP

The Australian sharemarket is tipped to start the week in positive territory following solid overseas leads, even as energy majors and gold miners threaten to temper any gains.

SPI futures are pointing to a lift of 0.3 per cent at Monday’s open, building on the sharemarket’s three weeks of consecutive gains through March, with banks and iron ore miners expected to be among the standout performers.

For banks, the strong lead-in comes from the US, where the 10-year US Treasury note jumped six basis points on Friday following a solid jobs report, as the two-year US Treasury bond spiked 18 basis points.

While market watchers digest the recent inversion of the Treasury yields, Friday’s moves should be a positive for the Australian banking sector on Monday, CommSec senior economist Ryan Felsman said.

“Markets are focused once again on the inversion of the two-to-10-year yield curve in the US, which is the signal for recession,” Mr Felsman said.

“Now, that’s not our base case. But what we did see, obviously, was rising market interest rates, and that could be supportive of bank shares tomorrow, in Australia in particular.

“So we could have a modest gain in the overall market per se, where financials outperform and energy underperforms, based on the lead-in from the US.”

Oil prices suffered their biggest weekly decline in two years last week, plunging 13 per cent after the International Energy Agency indicated it would follow the US in releasing oil reserves.

It came after US President Joe Biden announced he would release one million barrels of crude oil per day for six months in a bid to lower prices.

NYMEX WTI crude slipped 1 per cent on Friday to $US99.27, while Brent fell 0.3 per cent to $104.38. For the week, oil prices were down around 13 per cent.

“That’s the biggest decline for the NYMEX since 2011 in dollar terms, and it means we’ll likely see energy shares weighing on the market a bit tomorrow,” Mr Felsman said.

Declines in the price of gold, copper and aluminium on Chinese supply concerns will also feed through to the local miners in the day’s trade, he predicted. But that could be offset by strength in the iron ore miners following a sharp rise in the iron ore price.

Looking ahead, the big ticket item for the week will be the Reserve Bank board meeting on Tuesday. The market is not expecting any rate change this time around but onlookers are watching closely for any change in language from the central bank, particularly around its “patience” on inflation, and clues as to whether we can expect rate lift-off as early as June.

Originally published as Banks, iron ore miners to drive ASX 200 higher